Honeywell Will Spin Off into Two Individual Companies

Tuesday, October 10th, 2017

David Ancetti

On Tuesday, Honeywell International Inc. announced that it is planning to spin off its transportation and home businesses into two individual companies, the first effort of the conglomerate to streamline under its new CEO Darius Adamczyk.

The company announced that its global distribution and homes business, which includes security, fire protection and building controls products, would generate $4.5 billion in annual revenue, while its transportation arm, focused on its turbocharger technologies used in cars and trucks would have annual revenue of more than $3 billion.

The rest of the portfolio of Honeywell will consist of its high-growth businesses that are in six industrial end attractive markets, each is aligned to mega trends globally such as energy efficiency, urbanization, safety and infrastructure investment, said the CEO in a prepared statement.

The company is expecting the separations, which will not need the approval of shareholders, to be completed by the end of next year.

Adamczyk took over the CEO position this past March and immediately launched a portfolio review that has lasted months that took a look at every aspect of the business, including if it is better to remain whole or split up.

The effort was given an additional push this past April when Third Point an activist investor asked the company to spin off the big aerospace unit it has.

Analysts on Wall Street had expected for the most part that the company would keep its aerospace unit, but make other possible moves that would shrink the company that ended its last fiscal year with more than $39 billion in revenue.

The company’s transportation business is a portion of its aerospace unit. It aerospace unit has been in the spotlight as its biggest rival United Technologies agreed to acquire Rockwell Collins a parts maker in September for $23 billion.

The deal, which must gain regulatory approval and might receive problems from clients such as Boeing, has highlighted the advantages of scale for a business that at times has parts makers that are competing with clients.

Adding to the resistance to splitting the company is that shares of Honeywell in 2017 are up by 24%. On Tuesday, Honeywell announced that it had increased its guidance for earnings per share for the full year by 5 cents with its ranges now between $7.05 and $7.10.

Honeywell was successful under Dave Cote its previous CEO, who helped to turn the company around as well as boost the market value fivefold in his 14 years at the helm.